Fiscal deficit should not exceed 8% of GDP – ISSER’s Prof Quartey

Despite the onset of the COVID-19 and unplanned expenditure, the government should not exceed 8% of the fiscal deficit, a Prof of Economics, Peter Quartey, has cautioned.

The Director of the Institute of Statistical, Social and Economic Research (ISSER), expects expenditure above the 5% cap but expects the upcoming 2020 Mid-Year Budget Review by the Finance Minister, Ken Ofori-Atta to maintain fiscal discipline.

“Anything between 5-8% deficit should be fine,” he told theghanareport.com in an interview on Monday, July 21.

What is a fiscal deficit?

A fiscal deficit is a shortfall in a government’s income compared with its spending. The government that has a fiscal deficit is spending beyond its means.

The government projected its expenditures to fall in line with the Fiscal Responsibility Act, which imposes a deficit ceiling of 5% of GDP.

The Act, however, allows the government to suspend this restriction in the face of a public health emergency or an unanticipated severe economic shock.

Prior to the onset of the global pandemic, Ghana’s shortfall target was 4.7%.

However, Mr Ofori-Atta told Bloomberg in March that, “the deficit, which we had jealously guarded and kept under 5%, is now expected to widen north of 10%.”

In a recent interview ahead of the Mid-Year Budget presentation, Mr Ofori-Atta questioned concerns about the deficit when the focus should be on tackling coronavirus, which has claimed more than 150 lives.

The Finance Ministry, however, plans to revise this target to 6.6% of GDP due to the impact of coronavirus.

Election year deficits 

Ghana’s highest budget deficit ever was recorded in 2012, an election year which saw John Mahama elected president.

Concerns have been raised because 2020 is also an election year coupled with the adverse impact of the pandemic.

The country’s successive governments have become notorious for overspending budgets in election years.

Given the revenue challenges, Prof Quartey expects the Finance Minister to outline new and efficient ways of increasing funds to invest in critical sectors to boost the economy projected to shrink in the coming years.

Ghana’s economy is estimated to shrink to 0.9%. Coronavirus has wiped off about 6% economic growth estimates, the Finance Ministry has said.

“I would like to see expenditure prioritization. So, the critical things should feature and then those that cannot be met. Perhaps we may want to hold and then when our revenue numbers improve then we tackle them,” Professor Quartey suggested.

He encouraged the government to pursue philanthropists to support with funds which would be channelled to support needy households and people adversely affected by the disease.

Such resources could also be used for more social interventions to ease the burden of Ghanaians.

Stimulus packages for large firms

Businesses look forward to a government stimulus package, and the Finance Minister has confirmed that beyond the GH₵ 600m given to SMEs, other sectors like hospitality and aviation are in line for support.

Prof Quartey is expecting the government to outline details of a stimulus package for large companies.

He wants more funds to be dedicated to domestication because of the COVID-19.
In agriculture, for example, “I expect some interventions to go there to stimulate production”.

He also highlighted the need for additional support for the pharmaceutical sector to minimise importation of PPEs, medication and other kits.

Year of roads

The government declared 2020 a ‘Year of Roads’ and released a list of roads to be constructed while others are expected to be revamped across all regions.

“Many Ghanaians would want to know whether we are still in the year of roads or COVID-19 has changed that focus. If it is still the ‘Year of Roads’, then we want to see the roads that would be tackled and which ones would not be,” Professor Quartey concluded.

Some roads outlined by the Finance Minister to be tackled in 2020 were :

Roads and infrastructure Projects for the Ashanti Region:

Ahiankwanta – Obuasi

Datano – Ahokwaa – Suhenso

Nyinahene – Awisesu

Nyinahene – Kyekyewere

Okomfo Anokye – Abuakwa

Suame Interchange

Oforikrom Interchange

Manhyia Sub – Metro

Suame Sub – Metro

Tafo Pankrono Sub – Metro

Asokwa Sub – Metro

Kwadaso Sub – Metro

Oforikrom Sub – Metro

Subin Sub – Metro

Nhyiaeso Sub – Metro

Bantama Sub – Metro

Mampong Inner City Roads

Roads and infrastructure Projects for the Brong Ahafo Region:

Atebubu – Kwamedanso – Kojokrom – Riverside

Sunyani Inner Ring Road

Sunyani Inner City Roads

Tepa Bomaa – Yamfo

Berekum Inner City Roads

Duayaw – Nkwanta

Odumasi – Seikwa Nkwanta

Bediako – Kasapi – Camp 15

Roads and infrastructure Projects for Eastern Region:

Kwabeng – Abomosu – Asuom

Kwabeng – Akropong

New Abirem-Ofoase-Akim Oda

Akyem – Ankaase town Roads

Akyem Fremponso

Mampong – Kofiase

Anwiankwanta – Obuasi

Kessekrom-Adiembra

Koforidua Interchange

Akroso – Asamankese

 

Roads and infrastructure Projects for Western Region:

Prestea Inner City Roads Benchema – Adwofia Asankragua – Agona – Sefwi Bekwai

 

Roads and infrastructure Projects for Central Region:

Awakrom-Amisano(Ekumfi) Apawusika Road and Links Agona Swedru Inner City Roads Ankamu – Achiase – Swedru Swedru – Bawjiase – Adeiso Other Selected Cape Coast Inner City Roads.

 

Roads and infrastructure Projects for Northern Region:

Tamale Interchange Nalerigu – Bunkpurugu Road Tamale – Salaga – Bimbilla Yendi – Tatale Karaga – Gushegu

 

Roads and infrastructure Projects for Upper West Region:

Lawra – Han – Tumu Lawra – Dikpe Bridge Road Projects for Upper East Region Tutulega-Sandema – Wiase Navrongo – Naga

 

Roads and infrastructure Projects for Greater Accra Region:

Taifa – Burkina – Nkatia Burger – Dome – Kwabenya Mosque

Christo Asafo Area Roads-Taifa

Pure Water Roads and Links – Kwabenya

Fan Milk Area Road – Anyaa

Adu Gyamfi Road – Anyaa

Selected Roads in Anyaa

Road Projects for Greater Accra Region:

Apostle Sarfo Onyinase Road

Pentecost University Road

Omanjor to Olebu Road

Abease Road to Ablekuma

A-lang Area Road-Sowotuom Race Course Medical Centre Road

Selected Roads in Gbawe

Nanakrom – Santeo Ashaiman Road

Road Projects for Greater Accra Region:

Adenta-Dodowa Road (Dualisation)

Ofankor Hospital Link Road

Abensu Afiama Taxi Road (Trobu)

Israel Junction Sound Foundation-Blue Gate and Yeboah Street-Nii Ankraman (Trobu-Amasaman)

Government, in partnership with the private sector through PPP arrangements, will undertake various projects including Accra–Takoradi.

Highway Dualisation, Accra–Tema Motorway and Accra – Kumasi Highway Dualisation.

 

Roads and infrastructure Projects for Volta Region:

Asikuma – Have (45km);
Have – Hohoe – Jasikan (83km); and
Ho – Dzodze – Denu (99km).
The Dualisation of Ho Main Roads;
The Construction of the Ho bypass;
Replacement and expansion works on the Lower Volta Bridge at Sogakpoe; and
construction of bridge over the Volta River at Volivo; and  Dufor Adidome – Asikuma Junction Road.

Asutuare – Aveyime Road;
Upgrading of Klefe Town Roads in Ho Municipality;
Upgrading of Akatsi Town Roads;
Upgrading of Ketu South Area Roads;
Upgrading of Selected Roads in Kpando Municipality; and
Upgrading of Ketu North Area Roads.